Sustainability Sells

My article was published in the May/June 2014 issue of Winning Edge, the Magazine of the Institute of Sales and Marketing Management.

If you’re not part of Team Green you may not be on your clients’ preferred list for much longer. Green? Isn’t that about people in sandals and beards saving the polar bears? Maybe, but today we’re talking about green business, and how it’s affecting you, your clients and your sales.

Sixty-five of the world’s largest corporations, from Abbot Laboratories through BSkyB, Ford, Microsoft, Philips and Coca-Cola to Wal-Mart wrote to all their suppliers last year and asked them to disclose how they were going to cope with climate change.  And green business is not just about climate change, it’s about sustainable forests and sustainable fisheries, it’s about renewable energy, water, waste, carbon footprints and scarce resources. Open any FTSE 100 Annual Report and the Corporate Sustainability Report drops out, showing how they are making the world a better place. In a word, Green Business is going mainstream, and your clients will soon be knocking on your door to ask what you’re doing about it, if they aren’t already. 

In practical real-world terms, what does all this mean for you and your sales team? It’s about understanding the client’s needs - something you do all the time - but recognising that those needs are constantly changing. They can’t be truly green without your help. For your client, there are three main drivers towards sustainability - Reputation, Revenue and Regulations. Help yourself by helping your clients with these. 

But hang on! Before you start, do you know how your own organisation measures up? Have you seen the corporate environmental statement? Does your company work to ISO 14001 or any of the other sustainability standards? Make sure that you and your team can give the client the full picture. Make sure the people in back office and boardroom are giving you the full picture!

Reputation is the Number One driver which puts suppliers in the spotlight. Since the supermarkets found horse meat in their burgers and the press revealed the sort of conditions that Apple iPads were made in, these organisations have been desperate to claw back their credibility. Everyone else has been desperately looking at suppliers to make sure that nothing like that will ever affect them. If you do the minimum, their reputation is safe. If your company is doing more than it needs to, you’ll be more attractive as a supplier. On the other hand, in the face of the consumer your clients need to put their hands on their hearts and tell the world that they’re doing their greenest best - and if you’re not green and you supply them you’re making liars of them.

Number Two, Revenue, or profitability, is a key part of sustainability. Sustainability is about doing more with less. If we can build the same product with less material we’re saving material cost. We may be saving production time, using less energy and making less waste as well - all driving more profits to the bottom line. How can you help your customer do more with less? Can you offer a product, a process or a system which will make your own clients more efficient and save them money? Makes it easy for them to make the business case! Can you do it before your competitors do?

Number Three - Regulations - everyone’s favourite! Quite simply, if you’re not complying with the increasing number of regulations it’s a deal-breaker - at the very least. Of course it’s not just the regulations that your own organisation has to obey, you have to think about it from the customer’s point of view. ISO 14001 - Environmental Management and ISO 26000 - Social Responsibility are desirable but not legally binding. On the other hand, REACH (Registration, Evaluation, Authorisation and restriction of Chemicals) and the CRC Energy Efficiency Scheme are just two of the many regulations which must be observed to avoid penalties.You don’t always need to be an expert in these things, but you do at least need to be aware of the jargon and know whether these are issues you can help with. Things are changing all the time, so if you keep up to date on the regulations affecting your particular market, part of your added value could be helping your clients keep up to date as well.

Objections? There are always objections, and there are very strong opinions on both sides of the question. You don’t need me to tell you not to get into an argument! 

“You’re not doing nearly enough!” To answer that you need to be clear on exactly what your organisation is doing and you need to know that what you are offering will comply with the standards that your client must meet. Ideally you’ll also know what’s being planned to make your organisation even greener.

At the other extreme: “This green rubbish?” (Didn’t the prime minister say something like that?) “It’s all a waste of time and money!” Actually, sustainable business is all about efficiency and doing more with less. Companies adopting a sustainable strategy are finding that it generally saves money. Savings you can share with your clients, even if they don’t believe that sustainability is a good thing.

Should you walk the sustainable talk? Certainly there will be some people who will be really upset if you turn up in a gas-guzzling 4x4. How about rewarding your top salesman with a hybrid? The Porsche Panamera, for example, or maybe a Lexus. There are green cars right across the range now. The BMW i3 is certainly worth a look. With 0-62mph in 7.2 seconds and a range of up to 200 miles it’s not at all what you expect from an all-electric car!

“It’s just a fad, isn’t it?” No, sustainability is here to stay. It’s the new way of doing business and the new way of staying in business, in the face of expanding world population, rising energy prices and declining resources. If sustainability was just a fad, would Tesco have set up its Knowledge Hub - the world’s largest sustainable supply chain resource? Would 722 institutional investors holding US$ 87 trillion in assets be supporting CDP to monitor the climate risk in their portfolios? Would Dow Jones have been publishing a sustainability index for the last 15 years? Would we have ever heard of the Global Reporting Initiative, Environmental Impact Statements or Carbon Footprints?

So sustainability is firmly here to stay. And as always, to succeed in this competitive world we all have to keep that one jump ahead. It’s not enough to be lean and mean. This time, you’ve got to be lean, mean and green as well.

Climate Change not an important issue for the Institute of Directors

Graham Leach, the previous Chief Economist at the Institute of Directors, wrote in the Director magazine of February 2014: ”10 years from now man-made global warming will have been exposed as a myth.” When James Sproule, his successor, visited Leeds last month I asked whether he endorsed that view. His response and my comments are below. I spoke to him again  this morning and he told me that climate change was not an important issue for the IoD.

In response to my question James Sproule said that there was disagreement within the IPCC (Intergovernmental Panel on Climate Change) between scientists and economists. The economist view is that it is reckless to plan for what might happen in 100 years’ time when so much has radically changed in the last 100 years and so much more will change in the next.

Here's what I think.
First of all, Graham Leach was not commenting on the planning cycle, when he said “man-made global warming will have been exposed as a myth.” He was rubbishing the science, which he is surely not qualified to do. His remark is reckless in that it could lead the uninformed to believe that there is nothing to worry about and nothing need be done. The report from the IPCC last month shows that it is 95% scientifically certain that we are on the threshold of a problem which will have serious consequences far sooner than 100 years hence. 

Secondly, not all economists suggest that we should sit on our hands and wait and see what happens. Lord Stern published his report in 2006 where he stated that a relatively small investment of global GDP could mitigate the worst effects of climate change if action were taken promptly. Since then he has written that things are worse than he then thought, and since not much action has been taken the cost of mitigation is now very much greater.

Third, CDP, the Carbon Disclosure Project, is an organisation backed by more than 750 global institutional investors who have assets worth $US92trn under management. Each year they request information on greenhouse gas emissions, energy use and the risks and opportunities from climate change from thousands of the world’s largest companies. If they take the trouble to do this they surely believe there is an issue and that the information will enable them to take action - else why collect it?

In my view the future is sustainability. Sustainable business is essentially efficient business, and there is nothing new in examining each stage of the production process to see what improvements or cost savings can be made. Carrying out this analysis from a sustainable viewpoint could mean assessing the availability of key materials and redesigning products to make less use or no use of them. It could mean embracing new technologies such as 3D printing, where there is minimal waste and large parts of the supply chain can become redundant, so transforming some industries. The circular economy will become increasingly important as producers redesign not just to make less use of materials but to produce items that can be disassembled, remanufactured and re-used, thus saving the costs of new materials and the cost of waste disposal. Sustainable business is good business. Developing renewable energy is sustainable from the energy security point of view. Nobody controls our wind and no one can cut off our sunshine. We don’t get much gas from Russia, but we do get 20% of it from Qatar by sea. As the North Sea declines we’re a net importer of oil. A generation ago we were self-sufficient in energy. We can be again. (Without fracking.)

We have challenges. Climate Change is just one of them, but we need a clear understanding, a clear direction and a positive lead on the whole sustainable future. The “greenest government ever” has failed to develop coherent policies. I would like to think the IoD could inject some informed realism into the debate. 

If you can spare 9.33 minutes, have a look at this video http://youtu.be/zORv8wwiadQ 

Energy and the Bubble Economy

On 20th May the Yorkshire Chapter of CASSE, Centre for the Advancement of the Steady-State Economy, presented this event at Leeds University Business School. I expected one session but there were two separate presentations.

Energy

Tiago Domingos of the University of Lisbon took the first module: “Can energy use and economic growth be decoupled?” Green growth is possible by reducing the energy/GDP ratio, and to do that we need to decarbonise the energy system. This proved to be a technical talk; knowledge of thermodynamics a distinct advantage. Apparently energy cannot be destroyed and in any energy transfer there are always losses. This is demonstrated by our present electricity generation process, where around 60% of primary energy is wasted in generation and transmission and only 20% of what’s left (Final Energy) is Useful Energy. The rest is dissipated as heat in the appliance. He claimed that an output of 0.02kWh needs an input of 25kWh, which seems to be overstating the case a bit, but even a loss of 90% is bad enough. We pay for final energy - and all the primary energy that goes into it - and waste most of it in inefficient appliances.

We now moved on to the thermodynamics bit and started talking about exergy. I hadn’t heard of it before, but this is what Wikipedia says:   

“In thermodynamics, the exergy of a system is the maximum useful work possible during a process that brings the system into equilibrium with a heat reservoir.[1] When the surroundings are the reservoir, exergy is the potential of a system to cause a change as it achieves equilibrium with its environment. Exergy is the energy that is available to be used. After the system and surroundings reach equilibrium, the exergy is zero.”

The professor then went on to propose that we should study exergy rather than energy, and gave examples of sources of exergy: electricity, coal, gas, biomass, oil, food. (Note that electricity is a source of exergy, but of course not of energy.) He stated that the important ratio is not energy/GDP but Useful Energy/GDP. There followed an analysis of energy statistics for Portugal since 1850 when the economy was agricultural, through industrialisation from 1920 and onwards. The Final Energy/GDP ratio dropped sharply and plateau’d from 1960. Useful Work/GDP was at the same level as 1850, although primary energy consumption went up.

Domingos quoted the economist, Nicholas Kaldor, who said that in the long term the wages/interest, interest/capital, capital/GDP and Useful Work/GDP ratios were constant in most economies. There are also thermodynamic limits to the efficiencies of transforming primary to final energy and final to useful energy. The whole thing seems to lead me to the conclusion that there is very little scope for decoupling energy from economic growth. What hope for growth? Having said that, surely it all comes down to efficiencies. And while electricity generation from coal, gas, nuclear and even biomass can have losses of as much as 70%, the losses in generation from renewables are less than 1%.

I found this on the internet: http://www.theguardian.com/news/datablog/2012/jul/06/energy-green-politics#zoomed-picture 

The Bubble Economy

Our second speaker was Robert Ayres (from INSEAD in France) who will shortly publish "The Bubble Economy: Is There a Sustainable Way Forward?”. 

This was a very different presentation, and referred to Tulip Mania, the South Sea Bubble, the Trust Bust, the Dot-com Crash and the Sub-prime Disaster, among many others which litter history. Apparently there is a plausible story and investors start to pile in. Rumour builds on rumour, possibly helped along, until every man in the street sees a golden opportunity and mortgages his house to buy in. Canny investors get out at the top, confidence evaporates, prices crash and small investors lose their houses. Ayres predicts another bubble, this time involving fracking. Presumably that will happen in the US. After this week’s report from the UK Geological Survey few people in this country will surely invest!

Since 2008 we have seen pressures in the economy from climate change and the end of cheap oil, leading to inequalities and a slow recovery. In 2008 the banking system was under such extreme stress that governments had no choice but to rescue it. Household net worth collapsed and the middle classes have still not yet recovered. Oil price rises are inevitable because the rate of new discovery of oil is not keeping up with production. Saudi Arabia continues to be a major global oil producer, but its recoverable reserves remain, and have remained constant since 1988. (This is apparently justified by improving extraction techniques.) The oil price affects the global economy, but Ayres claims that it is only recently that the IMF has included the price of energy in its models. We need to decarbonise our energy and this is becoming more achievable as the average cost of onshore wind has been falling annually by 14%. The price of solar PV is falling faster; not yet to grid parity, but arguably coal generation benefits from hidden subsidies in that it does not pay the true cost of pollution. The costs of renewables and hydrocarbons are reaching a crossover point as new technologies, experience and economies of scale drive down renewable costs. Could we create a renewables bubble? Ayres told us that there are substantial reserves held by US corporates in overseas banks and doing nothing. Let’s not have a bubble, but let’s have some solid investment.

The future growth paradigm will be based on energy efficiency, not demand.

Questions

Questions came thick and fast and this a summary of what I picked up. 

Why will energy costs rise? asked a former Shell executive. Because Saudi is running out and the projected reserves in the US have been overstated and we are using it faster than we’re finding new reserves. Well, when he was at Shell they tried predicting the oil price and got it totally wrong….

Can we really substitute electricity for oil? Yes, but it is difficult and time-consuming which is why the price of oil matters…Is 30% the maximum share of energy that the UK can source from renewables? I would have thought that was pessimistic, myself.

If the future is efficiency, what about user behaviour? The rebound effect means consumers can spend the same and use more. Prices must be controlled by governments to prevent this. A green levy could keep expenditure at constant levels and raise a fund for green research and investment.

Will lower-quality reserves demand more energy? Energy in for energy out is a problem with fracking...Timescales for decarbonising the economy are a concern. There are big opportunities for improving efficiency - notably transport and home heating (cars are still very inefficient) - but if we are serious about our 2050 targets we have a serious problem. Current policies - and politicians - do not recognise the extent of the challenge.

Education is lacking in high places.

And my conclusion? As always, spread the word. Make people aware that business as usual is not an option. Make them aware that big business has generally taken all this on board, but small business and the consumer need to follow on. It’s not about a lower standard of living, it’s about doing things differently and more efficiently. It’s about not sacrificing the long term for the sake of the short term. 

Please tell any politicians you meet.

Business Success in a Changing Climate

Yesterday I went to EcoFair14, an exhibition and conference with six parallel presentation streams. It was great to meet friends and make new contacts; to see established products and find out what has been developing over the last year.

My first session was Business Success in a Changing Climate by John Chubb of yourclimate.org  Rather than business success, he was talking about business resilience which of course is equally important. He started with the statistic that 80% of organisations without emergency continuity plans never fully recover from a disaster. And he reminded us that there had been severe weather incidents every year since 2000 in the UK. We've seen freezes, floods, water shortages and heatwaves. In that time the Great Yorkshire Show had to be abandoned and there was the East Coast surge; ice and snow closed roads, schools and businesses and some agricultural crops were wiped out. What is certain is that extreme weather events will be more frequent in the future and a move to a low carbon economy won’t change it. We can expect warmer, wetter winters; hotter, drier summers and it’s far cheaper to prepare than to react. (Didn’t Lord Stern say something like that back in 2006?)

John gave us case studies: the chemicals firm that moved its IT to the first floor and its electrics to the roof, bolted down its bulk tanks to stop them floating away and built a bund to keep all but the worst of the water out. He told us about the plant hire company that was unable to hire out pumps in a flood because its own premises were under water. A firm that survived - but only just.

Resources

John gave us all his excellent guide to Weathering the Storm. If you contact him via yourclimate.org maybe he’ll send you one. He pointed us to the Association of British Insurers, which publishes advice on flood prevention and also looks at the future from an insurance point of view https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/Join-the-debate/Identifying-the-challenges-of-a-changing-world If you want to know if you’re in a flood risk area the Environment Agency has the answer: https://www.gov.uk/prepare-for-a-flood . Sometimes we get a heatwave which can be dangerous for the elderly and very young and can cause problems at work. More advice from the NHS: http://www.nhs.uk/Livewell/Summerhealth/Pages/Heatwave.aspx and from the Health and Safety Executive: http://www.hse.gov.uk/temperature/  You can assess your business resilience at businessresiliencehealthcheck.co.uk from Business in the Community. There are Local Resilience Forums, where businesses can get together to assess risks and work together to meet them. This is the one on the Humber: heps.gov.uk 

John’s final points were that customers increasingly need to know that their suppliers are secure. (See my Green Supply Chain workshop!) The impacts of extreme weather are neither equal nor fair.

A great start to the event. More about other presentations to follow.

Climate Change, life and death

Professor John Broome, of the University of Oxford and author of “Climate Matters”, delivered the Royal Institute of Philosophy lecture at York University this week.

His is a philosophical approach to climate change. How is that relevant? The United Nations Framework on Climate Change sets out to avoid “dangerous anthropogenic interference with the climate system.” To achieve this it needs to:

1. Identify the level of emission concentration in the atmosphere low enough to prevent dangerous interference
2. Define acceptable global annual emissions
3. Allocate these annual emissions fairly  among nations

Moral philosophers are involved in stage 3, but stages 1 and 2 are decided by scientists, economists and politicians. Professor Broome disagrees with this because value judgements are involved at all three stages and he doesn’t believe that scientists, economists and politicians are much good at making such judgements. He is concerned that the UN Framework on Climate Change suggests that decisions on what constitutes dangerous climate change are value judgements and should be “determined through socio-political processes.” He doesn’t think the result of this process can be readily supported. The IPCC has set a target of a maximum emission of 1 trillion tonnes because that gives a better than 2/3 chance of keeping global warming below 2°C. Why 2/3? Why 2°C?

Professor Broome believes that decisions should be made on expected values, not on likelihood. For example, the likelihood of the average house burning down is very small but the consequences are likely to be very serious. Because of the value of the catastrophe, it makes sense to buy a fire extinguisher.

How can we evaluate the harms and benefits of climate change? People are already dying as the result of climate change. The effects of weather are significant, leading in turn to poverty, malnutrition and disease. The fact that people die as a result of climate change is negative in itself, but as a consequence of their deaths there are fewer descendants and future generations are smaller, even to the extent that human extinction becomes an increasing possibility. The effect of climate change on the population - and vice versa - is largely ignored by governments. Some argue that changes in population levels are ethically neutral: Broome challenges this, but admits that we have no consensus on how to take these changes into account. The population elephant remains in the room.

Questions at the end of the session drew the comment that being nice is not good enough. We need to promote green virtues, but there are not enough virtuous people, so the only answer is government coercion. 

One questioner suggested that burning all the fossil fuel reserves in the world would not have serious consequences. He couldn’t quote supporting figures. Professor Broome disagreed but could not provide opposing figures and neither could I. However, it’s all here: 

http://eye.carbontracker.org/analysis-reports/view?analysisReportId=15552

Economic Outlook - ideas taken from a presentation by James Sproule of the IoD

Overview

The Institute of Directors represents senior executives of businesses of all sizes in all sectors throughout the UK. James Sproule was recently appointed Chief Economist and Director of Policy at the Institute. The week he came to Leeds to share his thoughts on the economy with Institute members. Here is what I learnt.

In the UK the tax take is about 35% of GDP. It is a feature of developed economies that proportion remains very stable over time. The figure is lower in the US and much higher in Denmark (48%), but varies by little more than one percentage point up or down over time.

Financial Crisis

The financial crisis was not just down to the banks, although they lent more than they should. Consumers borrowed too much, businesses borrowed too much and governments borrowed too much and let the money supply got out of control. An inflation-led crash can be resolved relatively quickly. A debt-based crash, like the one we have just had, takes longer because the money has to be paid back. UK consumers are already well on the way to paying down debt to 2008 levels. Business has benefited from a weaker pound and has chosen to take greater margins rather than seek greater market share through price cutting. Greater margins have allowed business to pay down debt.

The Budget

The Institute’s members represent a significant proportion of the UK’s GDP and it is able to represent their views at the highest level of government. In advance of the budget, members indicated that they wanted business rate reform, a higher income tax threshold, a higher starting point for the 40p tax rate, pension reform and a review of airline passenger duty. Several of these suggestions were reflected in the budget and pension reforms went much further than expected.

HS2

The Institute has made it clear that it does not consider that HS2 will be a solution to the North/South divide - a view endorsed by “Failure to Transform: High-Speed Rail and the Regeneration Myth,” a report issued this week by the Institute of Economic Affairs. Apparently this view was not popular in Whitehall and the IoD was called to account but protested that as independent organisation it had every right to reflect its members’ views. The government is running regional roadshows to promote its case.

Threats to the Economy

The euro zone continues to have problems. In southern Europe the banks are unable to lend to prime the pump for recovery. This is partly because their safe asset ratio has been raised from 2% to 12%. More importantly, many depositors in the south have transferred their savings to banks in the north. The logic is that if any of the southern countries drop out of the euro then the new local currency is likely to devalue by as much as 30% or even 50%. Savings tucked away in euro in the north are safe, but not available to fund investment in the south.

Inflation is a likely future threat to the UK economy. Although there has been a rise in the money supply, inflation remains low because the velocity of circulation remains low. Governments always promise to keep inflation under control, but historically governments have always used inflation to reduce government debt, so who’s to say this government won’t be tempted?

Wealth Distribution

The Gini coefficient is a measure of wealth distribution where 1 means that all the wealth of a nation is in the hands of one person and 0 means that it is equally shared. Currently Saudi Arabia is rated at 0.6 and Russia at 0.2. In 1979 the UK was rated at 0.24, in 1980 at 3.4 and is currently at 0.4, slightly above the rest of Europe. In 1979 the average salary was £4,000 and the majority of earnings levels were clustered in a very small range. The reasons for this were lack of incentive with an 83% top tax rate, an industrial structure with very large employers and trades-union-led national pay bargaining. By 2013 average earnings were £25,000 and the range was very much wider. There was merit-based pay, no national pay bargaining and a more diffuse economy with small businesses and start-ups. It would be impossible to narrow earnings differentials by moving back to the 1979 situation.

One percent of the UK population are super-rich. This group is not affected by the same drivers that influence the rest of the economy; their position is the result of globalisation and opportunities where winner takes all. It would be possible to drive out the super-rich through taxation, but it is not clear whether that would be desirable. Taxation would put their wealth into the public purse and boost GDP in the short term. At the same time it would remove these funds from investments in the long term. Is the government the best spender of money? Should the US tax Bill Gates to the extent that he can no longer afford to fund the eradication of malaria in Africa?

Challenges for the Next Government

There is still work to be done on the deficit. Cuts will continue and their full effect has yet to be felt. Only a government with a substantial majority will be able to keep its nerve on this. Growth is good at the moment, trending at 2.5%. However, we are approaching a demographic inflection where the working population is shrinking. Unless we can improve productivity this could pull growth below 1%, which will feel like recession to many people.

Questions from the floor

What would be the effect if the living wage became the minimum wage? Wage rises have outpaced productivity. If wages rise even further it will make businesses less competitive. The benefit system overcomes this to an extent, but there is no doubt that the tax credit and benefits systems need reform.

Can we look forward to a stable GBP/USD exchange rate? Nobody can predict exchange rates. Continuing uncertainty in the euro zone may reduce the value of the euro against the dollar. The influence of the euro zone might cause the pound to weaken.

If HS2 is not the answer, what, if anything will correct the north/south divide? Logically, as overheads and wage rates rise it makes sense for organisations to move their back offices out into regional centres. The pressures are there, but for the moment they seem to be resisted. Within 20 years it is likely that more wealth will flow from the south-east to other parts of the country, but there will never be equality. In an aside, there is every possibility of a housing crash if interest rates rise. Traditionally borrowers mortgaged for three times annual income but in this time of unusually low interest rates they are borrowing four times or more. If interest rates go back to more normal levels many borrowers will be over-stretched, and not just in the south-east.

What is the circular economy?

BSI, the UK standards organisation, hosted a stakeholder day on Waste Prevention and the Circular Economy this week. I joined a round table discussion on "What is the circular economy?"

The definition we came up with was:

“Sustaining economic viability without compromising resources, including land, water and living space, or compromising the environment.”

There was a wide range of opinions and ideas. Some saw little difference between our definition and sustainable development. The implicit “fair shares for all and fair access to materials” is very similar to the original definition of sustainability in the 1987 Bruntland report. 

We turned our attention to how we would achieve the circular economy. Legislation will define what is needed whilst standards will show how it can be done. We need something like a Kyoto agreement for the circular economy, hopefully more successful than the original Kyoto agreement. EU regulations for eco-design, material circularity and so on can contribute to the establishment of the circular economy, but we need global action both by governments and companies. 

Marks and Spencer was cited as an example. They demand that their Turkish suppliers measure their carbon footprints  - something they would never consider doing without pressure from M&S as a major customer. 

Legislation and taxation imply penalties but it is far more important to have incentives at all levels. We need clear strategies, tools, research and education, including education for both designers and consumers. Clear communication and explanation of the ideas can generate more consumer and employee loyalty.

The question was raised whether the circular economy could apply to all sectors and all industries. We thought there should be an overarching concept but that standards should be more local as components of the whole. Some thought that the definition of the circular economy would change as we moved forward and get tighter and tighter. Others pointed out that there are already some 200 environmental standards and surely yet another standard is not needed.

We looked at how different nations will achieve the circular economy at different rates. For example, in some emerging economies the establishment of landfill sites is an advance, so there is an awful long way to go towards achieving zero to landfill. On the other hand developing nations are used to scarcity of resources and in many cases are far better at making good use of resources as a result.

You could say that the circular economy is work in progress.

Re-Thinking Progress - The Circular Economy

Bradford University, March 2014. A conference presented by the Ellen MacArthur Foundation

A personal overview by Anthony Day

This post is also available as a podcast at www.susbiz.biz

I came to Re-thinking Progress with my sustainability hat on. I’d read Cradle to Cradle by Braungart and McDonough a while ago and I thought it was a great idea but something for the long-term future. I left the conference knowing that ‘sustainability’ is a dirty word to many people there, and with a realisation that the circular economy is very much here and now. Throughout, we were directed to websites and books. There’s a list of links at the end of this article.

What was reinforced throughout the conference is that we currently live in a linear economy. This means that we take, make and discard. We use natural resources in our production process, create products from them and throw them away when we’ve finished. We then use more natural resources to make more products, so natural capital is depleted and the rubbish heaps get bigger and bigger. Clearly this can’t go on, so in a circular economy waste = food. Everything is re-used indefinitely, just like nature.

The sessions which I attended over the three days reinforced this basic message. Here’s what I learnt.

Alysia Garmulewicz presented “3-D printing and the circular economy”

3-D printing or additive manufacturing is a whole new system, not just a new technology. 3-D objects can be printed cheaply in the home or high precision components can be produced on site on demand. Objects can be created in plastics, metals or even food. Supply chains are radically shortened - no factory, no distribution, no inventory. There are social implications as well. The Ethical Filament Foundation helps litter-pickers from developing nations to create an income by creating feedstocks from waste. Production can be localised, and as each object can be customised the consumer becomes closely involved with the process.

Ken Webster facilitated a session on “So you think you know about the circular economy?” He told us that any economy is composed of just energy, materials and information. We worked in teams to see how the various components and policies fitted together in different ways to make either a linear or a circular economy. He introduced concepts like the Chicago Plan - all lending must be backed by deposits; the biological cascade - using materials for different purposes as they degrade throughout their life; the use of complementary currencies. His example for this was rewarding people for picking up litter (more litter!) with free bus tickets. They got free travel using spare capacity on the buses and the litter got picked up. [Many years ago I had an idea for a recycling reception centre. People would bring in newspapers, bottles, tinfoil and so on and I’d give them trading stamps in return. It never happened and who remembers Green Shield stamps now?] We need to tax things we don’t want to happen, like resource use, rather than taxing things we do want to happen, like employment.

Flora Poppelaars spoke on “Designing products for a circular economy”. Her presentation was based on her internship with Vodaphone when she examined the possibility of a re-usable mobile phone. The circular economy implies services rather than consumption. In other words a mobile phone user does not own the phone, they pay a monthly subscription for a phone service and if anything goes wrong with the handset it goes back to the manufacturer and a replacement is provided. To make this business model viable the manufacturer must be able to disassemble the handset and repair or remanufacture it. We saw how designing for disassembly is important and how it permits customisation as well as re-use. Motorola’s Project ARA and Phone Blocks (links below) both show how the consumer can choose a better camera, a louder speaker or a dual SIM configuration, or anything else to meet their needs. Flora also told us about Ask Nature, the website which shows how nature addresses problems from aeronautics to architecture and sounds to swimming and how we might adopt these techniques. 

The first day closed with a presentation by Ellen MacArthur by telepresence from HQ in the Isle of Wight. The Ellen MacArthur Foundation was established in 2010, backed initially by National Grid, Renault, BT, Cisco, and Kingfisher, and now by Unilever, Phillips and McKinsey as well. It is accepted at the World Economic Forum, linked with universities across the world, holds an annual summit and is planning a Disruptive Innovation Festival for October of this year.

Ellen explained how efficiency is fundamentally important, but it is a transitional strategy. Efficiency cannot be increased indefinitely. As somebody said, the laws of physics are non-negotiable. She gave us another example of the service economy, where Phillips is contracted to provide lumens, not lighting equipment. Phillips provides the lights and the electricity and the client pays for a guaranteed level of illumination. She reminded us that food waste going to landfill in a traditional linear economy represents a loss of embedded, heat, energy and fertiliser. In a circular economy this all goes back into the production process.

It was an inspiring presentation, difficult to replicate on the page. I certainly left looking forward to the next day.

I started Day 2 with the Short Talk module. James Walker, head of closed-loop innovation at Kingfisher presented “The Role of the Consumer in the Circular Economy”. He made the point that as a retailer he didn’t want consumers to stop consuming or he’d be out of business. For me, he made the most important point of the whole three days. To paraphrase: You won’t motivate consumers - or business - to change behaviour by frightening them or preaching the circular economy agenda. You need to motivate them by offering them value, not problems. For example, if we want stop people throwing old electrical items into landfill we can offer discounts or gift vouchers on part exchange. The message is key and needs to appeal to the customer. It probably won’t mention green, sustainability or the circular economy, but must be designed to stimulate the behaviour that meets those objectives. Make the consumer feel good, because problems don’t solve problems.

The second short talk was from Ken Webster on “Systems thinking, education and a circular economy.” Ken reminded us of the traditional “take - make - dispose economy” and contrasted it with the butterfly diagram of the circular economy. You can find the diagram here: http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/interactive-system-diagram The two wings of the butterfly represent the biological cycle and the technical cycle - each a closed loop as far as possible. The technical side mimics the biological side. On the technical side products are maintained to extend their lives. When this is no longer possible they are re-used or redistributed. When they no longer work at all they can be remanufactured, and when they are finally worn out the materials and components can be recycled into new. Waste and disposal in landfill is minimised. The technical cycle has recycling as part of the process, but as the last resort. Recycling in our current linear economy is frequently the first choice after disposal. It is usually incomplete, sending some parts straight to landfill, it is usually down-cycling - producing an inferior product - which itself goes to landfill in due course.

Ken told us about ordered complexity (need to look that up) and how this should be the focus of education because this is the real world. He told us that in a wired world teachers are no longer the sole source of learning. If people really want to find things out they can ignore formal education and do it anyway. “You don’t need permission for a revolution.” Things are changing.

What’s the connection between re-offending prisoners, 80,000 tons of frozen shrimp and a double-decker bus? Why, the circular economy of course! Graham Wiles from Flo-Gro Systems presented “Aquaponics and Biofloc - a circular economy solution to food security.” Apparently we eat 80,000 tons of frozen shrimp in the UK each year and these are harvested by bottom trawling, an unsustainable technique which devastates the seabed. Graham’s solution is aquaculture - growing the shrimps in tanks. But there’s more. Growing shrimps produces waste and Graham has used the waste to grow plants. Combining hydroponics with aquaculture produces aquaponics - a circular system. There’s still more! Graham has involved offenders, excluded pupils and mental patients in the construction of his aquaponic units. It’s given them motivation, self confidence and skills to move on to other jobs. Win-win-win. And the double-decker bus? Apparently he once had to install a fish farm in a bus to avoid planning restrictions.

“Circular Economy - why it makes business sense.” Ella Jamsin told us how the rapid rise of developing countries, ten times faster than the original industrial revolution, is putting pressure on resource prices and exaggerating price volatility. She reminded us that the biological cycle recycles and re-absorbs almost everything while the industrialised technical cycle ultimately sends almost everything to landfill. Successful re-use, re-manufacture and recycling depends on the initial design. Ella quoted figures showing products not designed for re-use had lower or negative values than those that had been adapted at the design stage. How do we bring products back into the supply chain rather than into the waste stream? By offering discounts for trade-in. By not selling products, but by renting their use. Car clubs are an example. The rental model makes higher quality products more easily available because consumers do not have to find a high initial purchase cost.

Education is geared to the linear economy. It is now time to change and adapt. It is now time to convince policy makers that the linear economy model is broken. The potential savings from adopting the circular economy are considerable. It has been calculated that the annual material savings on medium-life goods in the EU could be $630bn. The annual material savings on consumer goods could be $700bn. There would be energy savings as well.

“Higher Education to enable a circular economy” was a popular session facilitated by Prof. Peter Hopkinson and Stephanie Hubold. I’m not an academic, so I really went along to watch. Separated into groups, we looked at how higher education should be developed to incorporate the circular economy. My group looked at business education. We’re gong to launch the CMBA; the Circular MBA. I look forward to signing up for the one-year course!

Time for a game! Katie Whalen has developed a board game which could be the Monopoly of the 21st century. Appropriately it’s played on a circular board and it focusses on materials which are critically scarce. Each player is assigned a product which needs up to three of these resources. The object of the game is to obtain the materials and manufacture the products. The first to produce three items wins. Like Monopoly, there are wild cards. These are strategies, such as re-manufacture or redesign to save material, and players can choose whether or not to buy these. Then there are world events announced every so often by the game facilitator. Events such as massive price increases, or export bans by China - the major producer of most of these materials. Current events could be fed into the game. We had the opportunity to play with the only two sets of playing pieces that exist. I really hope this game can be commercialised. It’s a valuable teaching tool for students and for business people.

Yes, it’s still Day 2, and the final session I attended was “Teaching circular economy in a global context” by Rob de Vrind. Rob hit us with masses of pictures and masses of ideas. He took us from internet 0.0 to internet 5.0 and beyond. Here are some of the ideas he shared. Multinationals should be contained. We need to move from ego-centrism to eco-centrism. (Nice idea. Will turkeys vote for Christmas?) Tax materials, not labour. Read Jef Staes: Do diplomas kill passion and talent? Look at the Phone blocks video on YouTube. Check out the free resources at the Khan Academy. 

The internet is now responding to customised requests like liftshare and car sharing. Is social lending the end for banks? Crowd-funding? Why buy when you can borrow - especially things which you use infrequently or only for a short time? Ebay and Freecycle are part of the intelligent circular economy. Sustainability is making things less bad; it’s not the whole solution. Nature works on renewable energy, why not us? 50% of electricity in Germany comes from renewables, but only 4% in Holland. Some work to do there!

There’s 50 times as much gold in an iPhone than in the gold ores currently mined in South Africa. We use toxic materials; nature does not. Bio-based compostable plastics are available now. (Unfortunately the compostable plastic bottle is a contaminant when mixed with traditional bottles for recycling. It’s still a step in the right direction.)

Trigema makes compostable T-shirts

PUMA makes compostable shoes

DESSO carpets clean the air

Some Dulux paints clean the air

Companies like Steelcase Solutions lease office furniture

Herman Miller office chairs are designed for disassembly. (Although spares are very expensive at present.)

Increasingly, standards require that air and water leaving industrial plants are cleaner than when they went in.

Have a look at the Wuhan Energy Flower - amazing building. 

The book Cradle to Cradle broke new ground. Products can now be cradle-to-cradle certified. Why are we not using (more) geothermal energy? We can 3-D print plastic PV panels or even stem cells.

After all those ideas I just wanted to go home!

Day 3 - 09.00 in Bradford and 16.00 in Hong Kong. Paul Clarke addressed us across the ether on “Pop-Up Farm: engaging schools, communities, and business in the transformation of the urban mind.” Paul started by setting the scene. The fact that 99% of all food for Hong Kong is imported. That the utility of all our institutions is under strain. That we have only a 20-25 year window to change from industrial to ecological lifestyles. That Beijing is nearly paralysed by smog while China commissions seven new coal-fired power stations every month. Business as usual is leading us on track not for 2°C increase by the end of the century but 6°C. If we carry on like this, 30% of all mammals will be extinct by 2030. We are facing “The Great Die-Out”, the most significant extinction since the age of the dinosaurs. Only 3% of the world’s water is potable. Food and agriculture depend on fossil fuel. Soils are being compacted and nature is being stifled. Much top soil is now being washed irretrievably away. This can only lead to food insecurity and social unrest.

And now the good news. Coffee Club is taking the message, the promise of a different future, into schools. Quality coffee is supplied to schools and sold on at a profit to parents with profits used to establish eco projects.  Students analyse the supply chain. The links right back to the farm can be accessed via a QR code on every packet.

The Hitchhiker’s Guide to the Earth is an online game from the Pop-Up Foundation. It starts with a doomsday scenario. Will that motivate students or just depress them? Either way, Paul firmly believes that education must change. “Education is in the Dark Ages. It’s training for a world that no longer exists.”

“Bootcamp on the Circular Economy.” Yes, it’s Ken Webster again! He started off with an illustration of key trends - population, energy and all the rest, all trending towards infinity and demonstrating the impossibility of business as usual.  This session re-presented a number of recurring themes and reinforced them by putting a different spin on them. Recycling  legitimises the linear economy. It’s only a half-way house, postponing the trip to the tip for resources. Renting or leasing is already the business model for many major industrial goods such as truck tyres or aero engines. Ebay is almost a rental system - buy it, use it, put it back on ebay. Don’t recycle, up-cycle. (Ken couldn’t immediately think of an example of this, but I’m sure there is one.) At the very least, keep things in the production loop and minimise waste of every kind. A problem with recycling is that if it's super successful it suppresses demand. Our economy and our banking system both depend on growth. Infinite growth is impossible in a linear economy. The circular economy is the only answer. We can have continuing growth as long as we can re-use, remanufacture and recycle our resources.

The final session I attended was the “Circular Economy in the Classroom” drop-in session. A very professional presentation by teachers from Skipton Girls’ High School and Archbishop Holgate’s School in York showed just how much can be done to teach the circular economy and how enthusiastic the pupils are. Like the whole of the conference, it demonstrated that while the future reality could be doom and gloom, there is so much enthusiasm and so many ideas out there.

Now to convince business and the policy-makers!

This has been a brief overview of what I gained from the Re-thinking Progress conference. Thanks to the Ellen MacArthur Foundation for the invitation, and for making it all possible.

Here are links and books referred to by the various speakers:

The Ellen MacArthur Foundation ellenmacarthurfoundation.org 

3-D Printing

http://www.fabfoundation.org/about-us/

http://emps.exeter.ac.uk/engineering/research/calm/

http://www.nottingham.ac.uk/research/groups/3dprg/index.aspx

http://www.stratasys.com

http://www.ethicalfilament.org

http://www.3dhubs.com

So you think you know about the circular economy?

Re-inventing Fire - Amory Lovins

The Second Machine Age -Erik Brynjolfsson, Andrew McAfee

Designing Products for a Circular Economy

Cradle to Cradle - Braungart and McDonough

http://www.c2ccertified.org

http://www.asknature.org

http://www.projectara.com/#project-ara

https://phonebloks.com/en/goals

Ellen MacArthur - Disruptive Innovation Festiva;

http://www.ellenmacarthurfoundation.org/education/featured/disruptive-innovation-festival-2014-20th-october-14-november

Short Talks - these were professionally video-ed and will presumable be available on the EMF website in due course.

Role of the Consumer

Nudge - Richard Thaler

Stark - Ben Elton

Systems Thinking

http://www.ellenmacarthurfoundation.org/circular-economy/circular-economy/interactive-system-diagram 

The Gardens of Democracy - Hanauer and Liu

Cultural Genocide - Lawrence Davidson

http://www.fairphone.com

Circular Economy - why it makes business sense.

http://www.citycarclub.co.uk

Teaching circular economy in a global context

Jef Staes: Do diplomas kill passion and talent? http://youtu.be/G6JGYRodNeA 

https://www.khanacademy.org

https://www.liftshare.com/uk/

http://www.trigema.de/shop/index.jsf

http://www.desso.com

Wuhan Energy Flower : http://www.greenlinked.com/architecture/concepts/82-wuhan-energy-flower-worlds-most-sustainable-officebuilding-wuhan.html

Pop-up Farm

NASA - temperature change http://youtu.be/JRayIgKublg (there are many other videos from NASA on the theme)

Hope in a changing climate http://youtu.be/z_xET5iZSy0

Green gold - http://youtu.be/YBLZmwlPa8A

happycoffeebean.com

hhg2e.com

http://www.pop-up-foundation.org

Circular Economy Bootcamp

Steady State Economics - Herman E Daly (and several other books by him)

http://www.riversimple.com/Default.aspx ultra low emission cars

No surprises!

 No surprises in the Autumn statement after all the leaks. No surprise that Labour criticised the whole thing. Sadly, no surprise that energy policy, which is crucial to the long-term prosperity of the country, is being treated as a short-term political football. Obligations on energy companies have been relaxed so they are now able to save consumers about a pound a week on bills. Once again an increase in fuel duty has been scrapped. Subsidies for onshore wind power have been reduced and at the same time the duty on gas produced from fracking is cut in half.

In the short term, reductions in energy bills and the fuel duty freeze will help with the cost of living, (though Is £1 per week really important when the average energy bill is now some £1200 per year?) It’s suggested that the reduced support for onshore windfarms is designed to head off a threat from UKip, which is totally opposed to them. All these are good political points in advance or the 2015 election. Not sure why George Osborne is so desperately keen to promote fracking, when it’s clearly so unpopular!

Altogether, these measures are symptomatic of a chaotic energy policy. There are three issues that have to be taken into account when planning energy supplies - cost, security and pollution. 

Let’s look first at fracking. Driving high-pressure water down into shale deposits to drive out oil and gas looks like a good idea. It’s been very successful in the US. The Americans have reduced their carbon footprint by using shale gas, which is a much cleaner fuel than coal. They calculate that they are sitting on reserves of shale oil which are greater than all the oil left in Saudi Arabia. Certainly ticks the security box - as it would for the UK. We’re talking about resources firmly within our borders and under our control.

The trouble with fracking is that it doesn’t tick the other two boxes. Gas is still a fossil fuel which produces co2 when burnt. Globally, we cannot afford to burn all our fossil fuels because if we did the co2 would cause runaway global warming and extreme weather events which would damage food production and make some parts of the world uninhabitable. (Of course George Osborne doesn’t believe in this. He’s with the 5% of scientists who believe it won’t happen. The other 95% are sure it will.) Fracking uses vast amounts of water, it causes minor earthquakes and it releases methane, a highly potent greenhouse gas, into the atmosphere. Then there’s the cost. Nobody knows what gas from fracking will cost. Looks as though George expects it to be very expensive. That’s the second time he’s cut the duty! The sad thing is that fracking is no silver bullet. Nobody even yet knows whether it will work outside the US. In the UK the geology is different, the population density is different and the planning laws are different.

Relaxing the obligations on the energy companies means that they can slow down the process of offering free insulation for cold homes. Well-insulated homes mean less energy and lower bills. There are some (a very, very few) high-spec council homes that cost no more than £20 a year to heat. That’s the dilemma of the privatised energy companies. The less we spend, the less profit they make. In the long term more insulation, more efficient heating and lower bills are good for the consumer and good for the balance of payments. (Don’t forget, we import 20% of our gas from the Middle East, much of our coal from Russia, even electricity from France!) So who will win this one? The consumer or the energy companies? Don’t hold your breath.

Has the government really got an energy policy? Some of us have been warning for years that the lights could go out in winter 2014 or 2015, as power stations are retired before new ones are built. The government has announced a new nuclear power station that won’t be ready for 10 years, they’re offering subsidies to fracking but they don’t know if that works - and it will probably also take 10 years to commission. Meanwhile they are preserving demand by cutting back on insulation  and scrapping the fuel duty rise, and limiting supply by cutting wind power subsidies. Is that a credible policy?

Business Reimagined

Last week E3 Bradford held a Summit.

The closing keynote, entitled Business Reimagined, was delivered by Dave Coplin, Chief Envisioning Officer of Microsoft. he’s written a book with the same title, available from Amazon and all good bookshops.

Dave started by telling us he would project forward how people will live work and play in the future. Or perhaps how they could, because while technology is a force for good, all too often the way we use it means that technology has become a prison. We are using it to do the things we used to do, only faster. After 60 years the office has moved from a phone and a mechanical typewriter (I don’t think the IBM Selectric on your slide was around in 1950, Dave), to a phone and a keyboard today. We work with standardised processes which are designed to be efficient but overlook the fact that they dehumanise the workforce and demotivate. Why do we still commute hundreds of miles from home to office each week only to sit in front of a keyboard and screen like the one we have at home? Only the one at home is now often better! Why don’t we have local work centres where we can go and hotdesk with people in the same situation but who work for other organisations? We could spend our money locally and bounce ideas off people who have a completely different perspective from our colleagues back at headquarters. (I had that idea 30 years ago, Dave. Do you think it will ever work?)

Dave explained how open plan offices kill creativity, how we misuse email, how we’re wedded to the QWERTY keyboard (and AZERTY, QWERTZU and many others across the world) designed specifically to be inefficient, how we all have to work harder to overcome these obstacles of our own making.

So what’s the answer? Social business. Flexible working. Light-touch management with long-term objectives and bonus or oblivion depending on your performance. Nice work if you can get it, and certainly a great approach for knowledge-based roles. For me, I think the utilities, production, construction, the health service and a fair number of other organisations will always need careful planning, skilled management and comprehensive procedures. (I don’t want a debate when that nuclear reactor goes critical.)

I agree with Dave when he says that we should liberalise communication. Of course some things are commercially confidential, but as much communication as possible can speed decisions, enhance corporate knowhow and improve the work environment. (At the risk of being political, I believe that Edward Snowden’s revelations were good for democracy.) We already communicate more quickly as consumers. Have you tried tweeting a complaint about your energy supplier/phone company/car/insurance company/ISP? Quicker and cheaper than hanging on to an 0845 number!

Dave’s message is that we must reimagine our world. We must see the big picture and recognise that “We’ve always done it like this” is not a good reason to keep doing it. We must look for outcomes not processes and we’ll always need leaders, not managers. We need to educate so people have skills, not just a knowledge of tools. We need people with critical thinking. We need to teach people to use technology to the full and to use it responsibly. It’s people who do bad things on line, it’s not the fault of the computer.

Dave’s presentation was delivered with anecdotes, examples and humour. I’ve not repeated them here because I don’t want to spoil it if you get the opportunity to hear him live (or on YouTube, I believe.)

Many thanks, Dave. I’m off to read the book now. I hope it’s as good!

Let's beat up the energy companies!

Yes, let's beat up the energy companies! Let's ignore that we're not just buying energy, but paying for the infrastructure that generates it and delivers it to our homes. Let's ignore the infrastructure, just like successive governments have done, to the extent that it now needs urgent investment and could fail in a harsh winter. Let's ignore that profits pay for this investment (and also pay a lot of people's pensions.) Let's beat up the energy companies and ignore the fact that in unequal Britain those in fuel poverty are also struggling with the cost of food, petrol and the rest. Who shall we beat up next? The supermarkets? The oil companies? Surely not the government!

Published in The i Newspaper 30/10/2013